Wednesday, June 4, 2008

A Very High Probability Forex System

To be consistently profitable in trading any type of market, you absolutely must have two key ingredients: proper money management, and a high probability setup. In order to find out a high probability trade setup, you must carefully study the market you wish to trade in the time frames that you wish to trade it. This may involve such things as forward testing via paper trading or using small leverage, and/or backtesting; which can be done manually or automatically by coding the strategy in a trading platform that allows backtesting such as Tradestation or Meta Trader.

When you have found a highly probable trading strategy to trade by utilizing forward testing and backtesting, you must make sure that enough setups occur around the time that you are available to trade them in order to consistently extract profits from the market. If you don't find that enough setups occur when you're available to trade, try finding another strategy to trade.

The next step in trading is to follow a strict money management policy. For example: you may want to risk only 2% of your entire account size on a single trade. The higher the probability of the trade being profitable, the more you might want to consider risking on the setup. If a trade setup tests to have a probable outcome of only 60%, risk a very small portion of your account size per trade. On the other hand, if a setup tests to be 80% or higher profitable, you may want to consider risking up to 5% of your total account size.

If you work full time, and tend to be extremely busy, the good news is that there is a highly probable trading strategy that takes place in the Forex market usually once a week that tends to be around 94% profitable.